Ellie speakers tout infinite mindset, strong market fundamentals

The final day of the Ellie Mae Experience event in San Francisco kicked off with a conversation with a noted author and a mortgage market update from one of the leading names in the industry.

Author and motivational speaker Simon Sinek sat down with Ellie Mae’s Joe Tyrrell, and Mortgage Bankers Association Chief Economist Michael Fratantoni followed with an updated presentation on the market.

Sinek focused much of his talk discussing the focus which companies and individuals put on winning, and trying to win, at business. He framed it in terms of thinking of business as an infinite opportunity rather than the current finite thinking.

“When we play in the infinite game of business with a finite mindset – win, win, win – there are four inevitable things that happen: A decline in trust, a decline in cooperation, a decline in innovation and eventually a shorter lifespan,” Sinek said. “What we need to realize is that you can’t ‘win’ in business.

“Having an infinite mindset allows us to not only see if you met the goal but how you met the goal.”

Bringing that mindset to the housing industry, Sinek looked back to examine the effects of a finite mindset.

“You know this, the mortgage crisis, the bankers were playing a finite game … and everyone lost. It turns out there was no finish line, and nobody won,” he said. “People with an infinite mindset know there’s no such thing as best, there’s no such thing as No. 1. The opportunity is not to beat, it’s to outdo yourself, and use the others as a benchmark. But you’re not playing against them. You’re playing against yourself.”

When companies are looking to find their benchmarks and improve on their success, Sinek suggested that it look to the faults, rather than the triumphs, for the greatest lessons.

“Every project should end with what sucked and what sucked less. We’re never going to learn from what we did well,” he said. “And you develop a muscle for it, and people crave it. I think it’s a great habit.”

Among the other tips that Sinek shared with Tyrrell and the audience were trying to get away from technology as a crutch to communicate.

“We all complain about the email we get but we don’t realize the disservice we do to our people with the emails we send. For starters, stop hitting reply all when we don’t absolutely need to” he said, to loud applause from the audience. “And pick up a phone! It builds trust, it builds relationships, it’s much more efficient. Have phone calls. We overly rely on technology because it’s a finite mindset, we have to get our inbox to zero.

“Companies are simply a group of people. I think the more we can remember that business is a human enterprise, the more we will thrive.”

Tyrrell brought up the topic of millennials – referring to the group as riding into the housing market like Paul Revere, saying “The millennials are coming! The millennials are coming!” Sinek said that the group has been the first to grow up with both cell phones and texting as a part of their lives, with the Sept. 11 and financial crisis happening in their youths, and their reactions in business and personal habits reflect those.

“Every single one of them has been laid off or had a friend laid off. Of course they’re cynical. Of course they’re mistrustful of companies and leaders. They also grew up at a time when they were coddled by parents.

“We can’t hold it against them, we just have to adapt and understand. Because we grew up at a time when winning was a thing, and they’re not winning by the time they’re 24, they think something is wrong with them. So there’s tremendous pressure they put on themselves.”

Fratantoni followed with a glimpse at the market, which he said showed a strong background for success.

“For housing, a strong job market, low unemployment and slowly rising rates is a very good sign,” he said.

Fratantoni said the mortgage market has been around $1.6 trillion to $1.7 trillion in volume the past two years, and he expected that to continue through this year and 2020. The difference, he said, is a changing mix to a more heavy purchase market. For the next couple of years, he said, he expects about three-quarters of volume to be in purchase originations.

“If I would push this out to 2025, I think we’d see slow steady purchase growth,” he said.

That comes in part because of a steady mortgage rate, tied to activity from the Federal Reserve. Refinances dropped off as mortgage rates rose in 2018, but Fratantoni said the challenge was not high mortgage rates, it was the steep rise from 4 percent on a 30-year fixed rate mortgage in January to 5 percent in November.

“The beneficial part of this picture, if our forecast holds true, I think mortgage rates are go to be much more stable this year,” he said.

The millennials are coming into housing, as Tyrrell said, and Fratantoni said their impact is the most positive aspect of the environment.

“My prior boss used to say one kid, one bathroom, it works. Two kids, one bathroom, doesn’t work. It’s time to look for that house,” he said.

The rate of growth in housing rates has slowed, started in part by the rising mortgage rates in 2018, helping to keep homes from becoming unaffordable. But Fratantoni said margin compression has become a growing issue the last three years.

Using their base metric, MBA tracked margin averaging about 60 basis points in the past decade, but after reaching about 70 base points in the middle of 2016, that metric dropped to 20 basis points last year and likely will be about the same in the first quarter of 2019, Fratantoni said.

“What’s going to happen to make this better? We’re seeing consolidation and that might come through M&A or downsizing businesses, or exiting the market,” he said. “I think the backdrop for our industry is really quite strong now. But this challenge about running the business in a way that’s more productive, more efficient, is really what’s on our plate the next couple of years.”

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The Federal Reserve Board, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. have issued information on the host state loan-to-deposit ratios, which are used to determine compliance under Section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. Review the ratios in Dodd Frank Update’s Library.